SOUTH PORTLAND — The City Council agreed Monday night to set aside $450,000 in the coming fiscal year to defend the city’s Clear Skies ordinance against a lawsuit by the Portland Pipe Line Corp.

The ordinance, passed by the council last July, bans loading crude oil into tankers in Portland Harbor and effectively prevents the company from reversing the flow of its South Portland-to-Montreal pipeline to bring Canadian tar sands oil into Maine.

The money for the legal defense will come from three different sources: $200,000 from surplus funds, $200,000 from anticipated revenue increases, such as excise taxes and building permits, and $50,000 from increased property taxes.

“The city is engaging in defending an ordinance it believes is lawful,” Councilor Claude Morgan said. “This will be an important objective for this council and possibly a future council.”

The council approved the legal defense spending plan as part of a combined $95.5 million budget for municipal, school and county expenses in the fiscal year starting July 1 that’s up $3.4 million, or 3.72 percent.

The combined budget will increase the city’s property tax rate by 63 cents, or 3.69 percent, from $17.10 to $17.73 per $1,000 of assessed value. The rate increase will add $126 to the annual tax bill for a $200,000 home.

The $50,000 to be raised in taxes for the Clear Skies legal defense represents 1.5 cents on the tax rate, or about $3 of the annual tax bill for a $200,000 home, according to city officials.

The city has already spent about $130,000 on its Clear Skies defense – about $100,000 of which was covered by the fiscal 2015 budget, said City Manager Jim Gailey.

The city also has received $5,279 in contributions to its Clear Skies Defense Fund, which the council accepted Monday night and offered thanks to donors.

The city’s defense team is led by Jonathan Ettinger, a prominent environmental lawyer with Foley Hoag in Boston, and includes the city’s corporation counsel, Sally Daggett of Jensen Baird Gardner & Henry in Portland. The company’s defense team is led by Catherine Connors and Matthew Manahan of Pierce Atwood in Portland.

Both sides have declined to comment on the case while it’s pending.

In the lawsuit, filed Feb. 6 in U.S. District Court in Portland, the company claims that the ordinance is unconstitutional because it interferes with interstate trade, discriminates against Canadian interests, devalues the pipeline and infringes on areas of regulation best left to the federal government.

The city has asked the judge to dismiss the lawsuit, saying that the company cannot claim damages from a city ordinance because it has “no current plans” to reverse the flow of the pipeline to bring Canadian crude oil to Portland Harbor.

The city, for its part, is acting “to protect the health and welfare of its residents and visitors and traditional land use authority to promote future development consistent with the comprehensive plan,” according to the city’s motion.

The company, which has seen the use of its pipeline decrease in recent years, is joined in challenging the ordinance by the American Waterways Operators, a trade association representing the tugboat, towboat and barge industry.

The lawsuit has the potential to become a high-profile case that could take several years to play out and cost untold tax dollars. As host of the pipeline terminal, South Portland has thrust itself into a struggle between the oil industry and environmentalists who argue that Canada’s development and production of tar sands oil poses long-term risks for the environment.

Mayor Linda Cohen said she has received some nasty calls and emails from people who oppose the Clear Skies ordinance, but the overwhelming majority have been supportive.

“I can’t pass an ordinance and then stand by and not defend it,” Cohen said.